As a society, America tends to have extravagant tastes. Consumers have traditionally been the backbone of our economy and have stood up to the challenge, many buying goods and services that were slightly outside of their financial reach. The recession came and people reeled in their spending, making some marketers think that they were playing on an entirely different field than they were used to. Everyone preached low cost, at any cost in order to get a sale. Now that things seem to be improving, many marketers are probably looking at financial figures and breathing a sigh of relief. Relief is good, but perhaps those involved in promoting the sale of goods and services should still be in front of the drawing board, as opposed to pulling out their unused marketing plans from 2008 in the hopes of dusting them off.
Some Factors to Bear in Mind
- The vast majority of Americans fall within the loosely defined “middle class,” meaning that most brands need to learn the new spending habits of this group in order to stay afloat.
- Consumer spending was up in the fourth quarter of 2010, which is great news–but only if you sell high-end products; think Coach, BMW or Tiffany and Co. Most reports show that the upper class led the growth in spending (a very small percentage of the population), while the middle class continued to live paycheck to paycheck. If you can’t compete for the top earners’ money, a change of focus is in order.
- Commodities are on the rise. Globally speaking, food and energy are expected to be more expensive in coming months (and some say the trend will last years), returning to and even rising above price levels during the boom. This means that marketers have to compete for fewer disposable middle-class dollars as the majority of Americans will be spending more money on food and transportation.
Who Has a Good Model?
Refocusing is easier said than done. How does one organize a marketing plan to give people affordable products that they do not feel cheap purchasing? That focus itself is crucial to fostering brand relationships with the middle class. It might be useful to take a look at the vodka market to seek out inspiration. Alcohol is an acceptable model for two reasons: people from all income levels consume it and the recession showed us that brand loyalties can quickly change when monetary issues become relevant. You may disagree but how many new labels do you see at bars and restaurants?
A Look at Vodka
A few years back, and even as far back as the nineties, boutique (read “high price”) alcohol brands popped up every other day. It was easy to market high priced alcohol as cool and trendy for people who liked to hang out at clubs, or distinguished for those who preferred a snifter and a good book. Either way, companies were slapping a hefty price tag on water that had been distilled with a variety of grains or vegetables and calling it a day. This isn’t easy anymore, and if you want to compete for middle-class dollars, you should probably forget about steep prices. Now middle-class money will be spent on moderately priced products that still make the middle class feel as if they are purchasing a quality product. They are looking for value and substance.
Vodka is sold at every price level imaginable. While brands considered premium, like Grey Goose and Ketel One, were popular with the middle class before, that trend is shrinking. People want a good vodka at a reasonable price. Most don’t truly know the difference between what type of water was used to make the product or how the filtration process can improve vodka. Now brands like Svedka (which has been available for quite some time but is currently the fasting growing line of liquor in the nation) and Russian Standard (which is relatively new to the U.S.) are taking market share from their higher priced competitors. They are doing it by putting out a product that tastes good at a lower price. They are also paying attention to the other things that consumers identify with:
- Packaging- People respond to packaging. The vodkas that are on the rise all use glass bottles (plastic is seen as cheap, regardless of the fact that it is just a container) with well designed labels. Basically they make the vodka look as if it is acceptable for consumption by a middle-class spender, one who wants to save a few bucks but doesn’t want to be seen with a cheap product.
- Advertising- They promote the products with ad campaigns that cost money. They transcend lower price by making it a point to communicate that the products should be seen as quality. Spending on a campaign presents the product to people in a way that makes them think the product must somehow be of reasonable quality; otherwise it wouldn’t have a good ad campaign to go with it. You’ve probably seen low-price leaders like Skol on the shelf, but have you ever seen them advertised?
- Price- Back to price yet again. These labels that target the middle class are substantially less than the premiums, but the new strategy also sets price points below “traditional” middle-class vodka like Absolut. The new scheme says to shoppers “we are just as good but, we don’t cost as much.” It isn’t out of the realm of reality to think that Absolut will soon either cost less or be missing from shelves.
The goal is to show value. People want a reasonable price with a product that is not, or does not seem to others to be, cheap. It might sound like having your cake and eating it too, and perhaps it is, but that is how most spenders will be thinking from now on.
If you would like the opportunity to compare notes with and learn from other marketing professionals visit the American Marketing Association of Tampa bay online. We provide a great forum to seek out advise and learn about new tactics.
A Look Ahead